Rental cars boost Toyota's U.S. sales

Business

February 15, 2012

47% more autos sold to companies and other fleets

THE ASSOCIATED PRESS Associated Press Wed Feb 15, 2012, 07:27 AM EST

DETROIT — Toyota's strong start to 2012 got a boost from a market it has long avoided: rental-car companies.

The Japanese automaker sold 47 percent more cars and trucks to U.S. rental companies and other fleets in January, compared with a year earlier. Without those corporate customers, U.S. sales would have been up less than 1 percent instead of 7.5 percent.

The sharp increase in fleet sales is unusual for Toyota, which has long shied away from that market because it's less profitable than sales to individuals. Rental-car sales, in particular, can hurt a brand's image and lower resale values because they flood the market with models. Ninety-three percent of Toyota's January fleet sales went to rental-car companies. The rest went to corporate customers.

Toyota said the higher fleet sales won't be a long-term trend. It said it's making up for contracts it couldn't fulfill last year after Japan's earthquake limited car production.

Still, the carmaker is under pressure to perform better. Sales have fallen the past two years because of safety recalls and earthquake-related shortages. Toyota ended 2011 with a 12.9 percent share of the U.S. car market, down from 17.9 percent in 2009. And even with fleet sales, the company's January sales increase of nearly 8 percent lagged the overall industry, which gained 11 percent in the U.S.

Toyota's numbers don't show which vehicles went to rental companies, but two aging models — the Toyota Yaris subcompact and Toyota Avalon sedan — saw huge sales increases. That's often a sign that cars are being sold to fleets.

In a recent interview with The Associated Press, Toyota Motor Corp.'s U.S. sales chief Bob Carter said the company sold few cars to fleets in the second half of 2011.

because inventories were so low.

That has changed since Toyota got its factories working and ramped up production following the earthquake.

"We said we would make it up to them when we were back up to 100 percent," Carter said.

Toyota typically sells 7 to 8 percent of its vehicles to rental fleets. In January that rose to 18 percent.

Carter said fleet sales also will be high this month, but will drop to more normal levels in March. The company expects to sell less than 10 percent of its vehicles to fleets in 2012, spokesman Steven Curtis said. Toyota's chief rival, Honda Motor Co., sells few cars to fleets.

By contrast, Toyota's Detroit rivals rely more heavily on fleet sales, in part because they do more business with police departments and other government agencies. General Motors Co. sold 28 percent of its cars and trucks to fleets in January, while 29 percent of Ford Motor Co.'s sales went to fleets.

Michelle Krebs, a senior analyst with Edmunds.com, said January's numbers are a blip, and that Toyota clearly needed to take vehicles out of the fleet market last year in order to sell them to individuals. Edmunds data indicates Toyota's monthly fleet sales have never gone above 15 percent in the last five years.

Toyota hopes to win back market share this year not with fleet sales but with 19 new or updated vehicles, including the subcompact Prius C and an electric version of the RAV4 small SUV.

Some analysts predict the carmaker might also have to offer more deals to win back customers who have been shopping elsewhere. Toyota spent at average of $1,921 on incentives in January, which was lower than the industry average, according to auto shopping site TrueCar.com.